Lawsuit could undermine the EM law

Under the radar.

There have been dozens of legal challenges to the state’s former emergency manager law, Public Act 4, since Republican Gov. Rick Snyder signed it shortly after taking office in 2011.

During the period leading up to the citizens’ referendum to overturn PA 4 in 2012, the stream of lawsuits seemed endless — including, of all things, a challenge over the ballot petition’s font size.

But, for many cases, the judicial process has been slow, and we’re only now starting to see some come to the fore. In particular, a case being heard before the Sixth Circuit Court of Appeals in Cincinnati Wednesday, March 19, alleges cuts to health care benefits made by the city of Pontiac’s former emergency manager were illegal. Significantly, the case has since been expanded to consider whether all actions taken by emergency managers under PA 4 should be invalidated.

The implications of the court considering that larger question, according to the state and attorneys representing Pontiac, could be extreme enough to warrant concern. The retirees say that’s a thin argument, especially since the law may have been improperly enacted in the first place.

The case began in 2012 when an organization representing more than 500 of Pontiac’s 1,200 retirees sued the city and its former emergency manager Louis Schimmel after their health care benefits were reduced.

Initially, a U.S. District Judge denied the retirees’ request for a preliminary injunction that would have reversed the imposition of higher monthly premiums and reduced benefits. Schimmel has long maintained that a court-ordered restoration of retiree health care in Pontiac, which was eliminated altogether last fall, could push the city into bankruptcy.

When the decision was appealed to the Sixth Circuit Court of Appeals, that’s when it became more interesting.

In August, a three-judge appeals panel punted the issue back to the lower court, but also addressed something that hadn’t been considered in the initial lawsuit: The U.S. District Court was directed to consider whether acts taken under PA 4, eventually rejected by voters, were valid, as well as if the state legislature properly enacted the law. If the law was improperly enacted, the appeals panel said, then the issue pertaining to the health care cuts would be moot.

The possibility of a lawsuit invalidating PA 4 — and all actions taken by emergency managers under that law — has caused some observers to, putting it mildly, freak out. Attorney Stephen Hitchcock, who represents Pontiac in the case, wrote in a court filing that such an outcome “would create mass chaos.”

In response to the appeals panel’s initial ruling, Hitchcock requested an “en banc” hearing, an unusual session used to reconsider previous decisions from an appeals panel, instead of sending the case back to U.S. District Court.

The retirees’ lawsuit, Hitchcock wrote, is now a “challenge to the heart of State policy aimed at restoring fiscal order for troubled governments.”

Alec Gibbs, the attorney representing the retirees in the case, says the idea that invalidating actions under PA 4 would create mass chaos is a “red herring.” Only a fraction of emergency manager orders have been completed under PA 4, Gibbs says, and “the court doesn’t have to address any case but the one before it.”

Michigan Attorney General Bill Schuette felt strongly enough to ask to appear at the hearing and share 20 minutes of argument time. Schuette wrote in a Jan. 20 brief that it would be “unprecedented” for the court to weigh in on whether PA 4 was properly enacted.

When the state House voted on PA 4, it was later found to be 12 votes short of the required two-thirds vote majority for immediate effect, the appeals panel noted in its opinion. Nevertheless the bill was enacted immediately using a “rising vote,” where the presiding officer of the chamber visually examines if the two-thirds majority is there. It’s a tactic previously used by both Democrats and Republicans, the appeals panel wrote.

Although he anticipates the court won’t consider the immediate effect issue, Gibbs says the retiree health care cuts wouldn’t have been enacted had the legislature voted properly. If immediate effect isn’t granted, laws take effect 90 days after the legislative session concludes.